Maximizing Tax Benefits for Canadian Small Businesses
When it comes to equipping your small business, the financial considerations can be a major concern. Acquiring essential equipment without putting a significant dent in your budget is a priority for most business owners. This is where equipment leasing steps in as a prudent financial solution, offering not only flexibility and convenience but also significant tax benefits that can positively impact your bottom line.
The Tax Advantages of Leasing
For Canadian small businesses utilizing equipment leasing, there are two key tax benefits that can help optimize your tax returns.
1. Spread Out Sales Tax
One significant advantage of leasing equipment is the way it allows businesses to handle sales tax (GST, PST, and/or HST). Unlike an outright purchase where you face a sizable sales tax upfront, leasing allows you to spread out the sales tax liability over the entire lease term.
Why does spreading out the sales tax like this matter? Well, for some it might not matter. But for most, it will matter quite a lot. You see, with each lease payment you’re eligible to claim a portion of input tax credits against your day-to-day sales tax collection. It allows you to retain more sales tax credits over a longer period of time, instead of taking one massive tax credit all at once – possibly giving you more credit than you can effectively use.
2. 100% of Your Lease Payments is a Company Operating Expense
When you lease equipment, the entirety of your lease payments are considered a company expense in your annual tax return. Allowing you to claim significantly more corporate expenses than other equipment purchasing methods.
In contrast, other financing options, such as bank loans, may only allow you to claim the interest portion of your payment. If you were to purchase the equipment outright, only a small percentage of the depreciation value could be claimed each year.
Leasing provides the advantage of being able to claim the entire lease payment, maximizing your deductible expenses and potentially reducing your taxable income.
Take Action and Optimize Your Tax Benefits
Making the smart financial choice for your business means considering not only the immediate cost implications but also the long-term benefits. Leasing not only conserves your capital and keeps your credit lines intact, but it also ensures you get the tax advantages that come with spreading out costs and maximizing deductible expenses.
Ready to make the smart financial move for your business? Take advantage of the tax benefits that come with equipment leasing from Thomcat Leasing. Get a quick lease estimate tailored to your needs and discover how leasing can benefit your business financially:
Disclaimer: This article is for informational purposes only and does not constitute tax or financial advice. Please consult a tax professional for advice tailored to your specific circumstances.